Boss Power (BPU-V) has made $30 million from a uranium prospect without drilling a single hole.
The windfall comes thanks to a legal settlement with the British Columbia government, which has agreed to pay the sum, plus legal costs, for Boss to surrender all claims to the Blizzard uranium project near Kelowna.
Boss had applied to drill the project on April 21, 2008, just days before the province announced a ban on uranium and thorium exploration. Once it was imposed, the company accused the province of expropriation and launched a legal battle in late 2008 for compensation. Three years later the fight is over, with both sides avoiding a longer court battle.
“I think $30 million is a fair settlement for where we are now with the property,” Randy Rogers, president and CEO of Boss, said in a telephone interview. “It saves us the risk of litigation and several years of this being tied up in appeals.”
Boss’s share price climbed 13¢ to 29¢ with 500,000 shares traded on the news. When the ban was announced in 2008 the company’s stock price lost 25¢ over two days to close at 20¢. The company has 73 million shares out.
The settlement represents far more than the company invested in the project, but less than its assessed full market value. Boss wrote off $4.5 million for acquisition costs and environmental work already done at the project.
Blizzard hosts an historic resource from 1979 of 2.2 million tonnes grading 0.214% uranium oxide (U3O8). With 15% mining dilution, that made for 10.4 million contained lbs. U3O8, while at the time Boss’s work was to get underway, U3O8 prices were US$70 per lb.
“Realistically we thought that this property would be worth, in present value, somewhere between fifty million dollars and sixty million dollars,” Rogers says.
The project was originally put on hold in 1980 when then-B.C. Premier William Bennett imposed a seven-year moratorium on uranium exploration in the province. That ban eventually lapsed, but the uranium market was bad and no one pursued the project.
It wasn’t until 2005 that the people behind Boss Power reassembled the scattered claim ownership into a coherent property, and in 2008 the company was set to drill 5,000 metres to twin holes, prove up the resource and potentially move on to a feasibility study.
One twist in the story, Rogers explains, is that while uranium exploration is under B.C.’s jurisdiction, mining is regulated by the federal government.
“It was going to be one season of drilling, and then this thing would have been a federal concern,” Rogers says. “So the province had just that very short
window in which to try to stop this project.”
It later emerged in pre-trial that the company’s drilling application had been purposefully blocked and not duly considered as the province moved ahead with the exploration ban, leading Boss to add a claim of misfeasance in public office to the lawsuit.
Rogers says that 15 to 20 explorers were affected by the ban, but that Boss is by far the most advanced.
For Gavin Dirom, president and CEO of the Association for Mineral Exploration British Columbia (AME BC), the settlement shows the government’s commitment to take fair market value into account and settle issues in a timely manner.
“They’re moving to address some of these legacy issues from a few years ago, that’s very positive,” Dirom says. He hopes the same process will be applied to the Flathead Valley in B.C.’s southeast, where mining, oil and gas development, and coalbed gas extraction were banned in February 2010.
Dirom says that just addressing the sunk cost, as is sometimes proposed, is “wholly inadequate and will not encourage investment in the province.” He also emphasizes that AME BC is against the ban on uranium exploration itself.
As for Boss Power, Rogers says the company will net about $25 million after settling with royalty payments and money owed, and the board will decide over the next few weeks what direction the company, with no other properties, will take.
“We do believe we want this to be a viable exploration vehicle,” Rogers says, though he notes that “we’re not quite prepared to say we’ll continue to operate in British Columbia.”
Rogers says that Boss has associated companies that it can partner with in the Yukon and elsewhere in the world.
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